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M&A Potential in the Growing Usage of EV and Nickel in Indonesia

Growing domestic and international demand for nickel – an essential component of the lithium-ion batteries that propel electric vehicles (EVs) – has led to a significant surge in initial public offerings and M&A transactions in Indonesia’s energy and mining sector.

Indonesia holds the highest nickel reserves in the world, accounting for 36% of the known global supply reserve, and remains unrivalled as a world leader in terms of production. Data obtained from the United States Geological Survey showed that nickel production from Indonesia amounted to 1.6 million tonnes in 2022, far surpassing the Philippines, which placed second on the list with an output of 330,000 tonnes. In 2023, surpluses are expected to accumulate for the third consecutive year.

It should come as no surprise that nickel has emerged as a dominating underlying commodity in Indonesian M&A dealmaking this year. The largest of these deals by far is the acquisition of Australian-owned Nickel Industries Limited (NIC) by PT United Tractors Tbk (UNTR) through its subsidiary PT Danusa Tambang Nusantara, which now owns 19.99% of NIC in a transaction valued at AUD942.7 million (equivalent to IDR9.32 trillion). Another noteworthy deal is the acquisition of PT Infei Metal Industry (IMI) by PT Harum Energy Tbk (HRUM) through two of its subsidiaries, in a transaction valued at USD70 million. IMI owns and operates smelting facilities in the Indonesia Weda Bay Industrial Park, North Maluku.

In recent years, the government has encouraged downstream processing of nickel to increase the added value of the product and protect it from fluctuating prices, creating a competitive ecosystem in the value chain of lithium batteries and EVs. Companies are directed to utilise and invest in local smelting facilities through the imposition of an export ban on nickel ores, which have yet to satisfy a predetermined processing threshold. According to the Indonesian Central Statistics Agency, downstream maximisation efforts have led to a USD4 billion increase in the value of Indonesian nickel exports in 2023, representing a fivefold increase from the country’s records in 2015.

Most recently, a Reuters report ahead of the APEC 2023 Summit suggested that President Joko Widodo was in talks with US President Joe Biden to establish a trade agreement on critical mineral supplies, which would enable Indonesian nickel and other core mineral products such as copper and cobalt to penetrate the US market. If negotiations are successful, Indonesia is set to become a key supplier to the US EV industry.

It is projected that the country’s nickel exports will continue to increase in both value and volume, along with nickel-related M&A deals. Recent regulatory developments in the mining sector and antitrust regulations demonstrate an increasingly open attitude on the government’s part to welcome foreign investment and streamline business conduct in general.

Regulatory developments

Terms of M&A in Indonesia  

In Indonesia, the legal framework governing M&A activities is mainly regulated in Law No 40 of 2007 on Limited Liability Companies, as most recently amended by Law No 6 of 2023 on the Enactment of Government Regulation In Lieu of Law No 2 of 2022 on Job Creation (the “Company Law”). The Company Law outlines the requirements, procedures and other provisions related to M&A transactions.

The Company Law does not entail significant changes in the procedures and requirements for M&A. Changes related to M&A concerning business competition have occurred recently. The Business Competition Supervisory Commission (KPPU) has issued recent regulations, including Business Competition Supervisory Commission Regulation No 3 of 2023 on the Assessment of Mergers, Consolidations or Acquisitions of Shares and/or Assets potentially resulting in Monopolistic Practices and/or Unfair Business Competition (“KPPU Regulation 3/2023”). According to Article 3 paragraph 1 of KPPU Regulation 3/2023, M&A that fulfil all the following specified criteria must be notified to the KPPU in writing within 30 business days from their effective date:

– the asset value and/or sales value exceeds IDR2.5 trillion, and/or the sales value exceeds IDR5 trillion;

– there is a change of control;

– the transaction is not conducted between affiliated business actors; and

– the transaction is between business actors that own assets and/or sales in Indonesia.

The criteria above are cumulative, meaning that all four points must be fulfilled for a notification to be required as regulated in KPPU Regulation 3/2023. The previous KPPU regulation prescribed fewer criteria to be satisfied and thus had a broader scope of transactions that had to be notified to the KPPU. With the entry into force of KPPU Regulation 3/2023, M&A transactions that would have required notification to the KPPU under the previous regulation are exempt from such obligations under the new guidelines.

Foreign direct investment requirements for companies in EV battery manufacturing and the nickel mining sector

As previously mentioned, the increasing domestic and international demand for nickel has resulted in a substantial volume of M&A transactions within Indonesia’s EV battery manufacturing and nickel mining sectors. This trend is further supported by the opening of said sectors to 100% foreign direct investment, based on President Regulation No 10 of 2021 concerning Investment Business Sectors, as amended by President Regulation No 49 of 2021 regarding amendments to President Regulation No 10 of 2021 concerning Investment Business Sectors. The 100% foreign ownership rule enables foreign investment companies to participate in and benefit from the Indonesian government’s emphasis on downstream nickel processing. Making use of local smelting facilities allows companies to utilise the local workforce, which in turn entails lower costs. Undoubtedly, this development increasingly motivates foreign investors to engage in the EV battery manufacturing and nickel mining sectors in Indonesia.

Specific provisions on acquisitions in the energy and mining sectors

Based on Articles 3 (1) and 72 (1) of Government Regulation No 96 of 2021 on the Implementation of Mineral and Coal-Mining Business Activities (GR 96/2021), business entities in possession of a mining licence must obtain prior approval from the Minister of Energy and Mineral Resources in order to conduct a transfer of share ownership.

Foreign investment mining companies must also keep in mind that, at the production operation stage, they shall be required to divest 51% of their shares gradually to either the Indonesian government (ie, the Central Government, the Regional Government, State-Owned Enterprises, Regional State-Owned Enterprises) and/or an Indonesian investment company, pursuant to Article 147 paragraph (1) of GR 96/2021. The regulation prescribes a set amount of share percentage to be divested and the corresponding year by which this obligation must be fulfilled. It sets forth different percentages and periods, depending on the company’s mining method and whether the company is integrated with processing and/or refining or development and/or utilisation facilities.

For example, pursuant to Article 147 paragraph (2) of GR 96/2021, the divestment scheme for mining companies that utilise the open cut mining method and are integrated with processing and/or refining or development and/or utilisation facilities is as follows:

– 5% in the 15th year since the start of production;

– 10% in the 16th year;

– 15% in the 17th year;

– 20% in the 18th year;

– 30% in the 19th year; and

– 51% in the 20th year.

Key takeaways  

As the owner of the world’s largest nickel reserves and simultaneously its largest producer, Indonesia has significant potential to become a leading figure in the EV industry.

Relaxations concerning foreign ownership in the field of nickel mining and EV battery manufacturing show an open and positive attitude from the government to welcome foreign investment in the sector. Through the 100% foreign ownership provision, foreign investment companies may benefit from the Indonesian government’s increasing emphasis on downstream processing.

M&A transactions in Indonesia have generally enjoyed relaxed regulatory oversight, with the recent KPPU Regulation 3/2023 further specifying the scope of criteria for transactions that must be notified for antitrust-related concerns.


Published by: Ivan F. Baely and Robert Hasan

Published on: 16 January 2024

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